The future of system houses lies in the cloud

vom 11.07.2019

02.07.2019 l by Henrik Hasenkamp

Two out of three companies use the cloud and system houses should follow. They have to reinvent themselves, as cloud providers for their customers.

In many companies today, enterprise IT is called: Business applications come from the cloud. This development has accelerated in recent years, as figures from the IT industry association Bitkom show: A good two thirds of all companies use cloud computing, another fifth are planning to use it.

In many industries, on-premise solutions are losing importance. Especially software for marketing, sales and support, but also office applications are migrating to the cloud. Even business-critical core applications are not immune to cloud computing. Many companies rely on ERP/MES solutions from the cloud and dismantle their own data centers. This trend is nibbling on the turnover of the system houses. As a result, revenues from sales, installation, operation, support and maintenance fall.

The cloud is nibbling on the system houses' business model

System houses react to this market development in two ways: they become consultants or offer managed services. Some system houses rely on their proximity to their customers and are developing in the direction of technology and digitization consulting. They support above all medium-sized companies in mastering the digital future. However, this market is also competitive, and the classic consulting firms have long been active in it.

As an alternative, managed services are an option, as the rise of cloud computing has led to a shrinking of IT departments. Many companies want to increase efficiency and further reduce IT costs. This is why they are looking for full service providers. As a Managed Service Provider (MSP), the system house now offers all-round carefree packages comprising network services, storage, applications and security. The disadvantage: the system house shares the customer with the cloud provider. In the long term, from the customer's point of view, it could appear to be just the henchman of a large provider.

For the system houses, this means a high risk that their own brand will be softened. They should therefore choose the opposite strategy by strengthening their own brand and becoming cloud providers themselves. All major providers have their own programs for sales partners for this purpose. Unfortunately, they are not suitable for every system house. Because a minimum turnover must be guaranteed. There are also extensive (and expensive) training courses and certifications. The biggest disadvantage: A vendor lock-in threatens their own customers. This is because every provider offers convenient but proprietary features. This makes it difficult and expensive to switch to another public cloud at a later date.

Off to the Cloud with a White Label Solution for Resellers
A much more effective solution for system houses is the virtual data center. It resembles a traditional data center, but is completely in the cloud. Numerous highly automated features support the system house in administration. In addition, all resources can be easily scaled in both directions.

Two solutions are available for system houses on their way to becoming cloud providers: "Grey Label" and "White Label". A grey label solution usually consists of a subdomain for the respective reseller and uses a standardized user interface. A white label solution, on the other hand, includes a customizable design. The system house can adapt it flexibly to its corporate identity - including its own logo. For end customers, it looks as if the system house, like the major providers, offers a usage-based cloud service with a self-developed admin interface.

A good example of this is a basic website hosting service. It contains a sophisticated load balancing of the server load and, if required, the number of processors and the available storage space can be increased within seconds or automatically adjusted via autoscaling functions. Due to the high level of automation and easy-to-use click interfaces, the administration effort is minimal. The resulting business model could be described as "Data Center as a Managed Service". System houses can now also reach small and medium-sized companies without a great deal of IT know-how in the area of remarketing. This gives system houses in transition the opportunity not only to maintain their market, but even to expand it.

The original article in german can be found here.

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